Q1 2023 Multifamily Real Estate Report: Houston, TX
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Houston, known for its thriving energy industry, diverse culinary scene, and world-class cultural institutions, is home to the headquarters of major corporations such as Chevron, Phillips 66, Sysco, and ConocoPhillips, contributing to its status as a prominent center for the energy, food service, and manufacturing sectors.
The population of Houston is 6.7 million with a 1.58% growth rate.
Houston's multifamily real estate market performed well in Q1 2023 despite national economic strain thanks to increasing rental rates, positive absorption, and new deliveries.
General Area Overview & Demographics
Houston, the fourth-largest city in the United States, is a vibrant and diverse metropolis located in the southeastern part of Texas. Known for its booming economy, rich cultural scene, and warm hospitality, Houston offers a unique blend of southern charm and cosmopolitan flair, yet many residents in the city struggled to keep up with their monthly rent payments in 2022.
The Economy, Demographics, and Culture of Houston, TX
The city's demographics reflect its diversity and multiculturalism. The population is predominantly composed of Hispanic/Latino, White, and African American residents. Houston also boasts a significant Asian population, with communities representing diverse backgrounds such as Chinese, Indian, Vietnamese, and Filipino.
Houston's economic prowess is driven by its status as an international hub for industries like energy, healthcare, aerospace, and manufacturing. The city is home to numerous Fortune 500 companies, including ExxonMobil, Chevron, and Phillips 66, contributing to a strong job market and a robust economy. The thriving energy sector, particularly oil, and gas, has played a vital role in Houston's growth and prosperity.
Apart from its economic significance, Houston offers a vibrant cultural landscape. The city is renowned for its diverse culinary scene, featuring an array of international cuisines. From Tex-Mex and barbecue to Vietnamese pho and Indian curries, Houston is a paradise for food lovers. The Museum District is another highlight, housing world-class institutions like the Museum of Fine Arts, the Houston Museum of Natural Science, and the Menil Collection.
Houstonians are passionate sports enthusiasts, rallying behind their professional sports teams such as the Houston Astros (baseball), Houston Rockets (basketball), and Houston Texans (football). The city also hosts various sporting events, including the annual Houston Livestock Show and Rodeo, which attracts visitors from far and wide.
In terms of outdoor attractions, Houston offers abundant green spaces and parks for recreational activities. Hermann Park, Discovery Green, and Buffalo Bayou Park are popular destinations for leisurely walks, picnics, and bike rides. The city's proximity to the Gulf of Mexico provides opportunities for beach trips and water-based activities.
Summary of Houston Multifamily Real Estate Performance in Q1 2023
The occupancy rate for Houston's multifamily real estate market reached 89.9% in Q1 2023, a slight decrease quarter-over-quarter from Q4 2022's figure of 90.7%.
Occupancy was highest amongst Class B properties at 92.1%. Absorption was positive in Q1 2023 at 989 units.
What Are Multifamily Rents Like in Houston?
Average monthly asking rents for Houston multifamily real estate increased slightly to $1,264 per unit in Q1 2023.
Average rents among Class A properties were $1,754 per unit while Class D properties averaged $756 per unit.
Purchase Activity
Sales volume for Houston multifamily real estate decreased significantly year-over-year: Transactions totaled $2.2 billion in Q1 2022 and fell to $393 million in the first quarter of 2023.
Notable Multifamily Real Estate Deals in Houston in Q1 2023
There were several notable deals that took place for Houston multifamily real estate in Q1 2023:
- Bascom Group purchased The Margot on Sage property for $63 million at $182,000 per unit.
- American Landmark Apartments purchased the Watersedge property for $55 million at $154,000 per unit.
- Quattro Capital purchased The Émile property for $43 million at $180,000 per unit.
- MarketSpace Capital purchased The 910 for $40 million at $86,000 per unit.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in Houston in Q1 2023
About 22,072 new multifamily units were under construction in Q1 2023. Approximately 11,000 of these units under construction were located in the city's Northwest submarket.
Units delivered totaled 3,774 for the quarter.
Market Forecast for Houston's Multifamily Real Estate Market
The city's multifamily occupancy rate and units under construction are projected to decrease as the year progresses.
Absorption and average monthly asking rents will likely increase throughout the remainder of the year.
Takeaways for Multifamily Real Estate Investors
More people are looking to rent as rising interest rates and home prices make it increasingly more challenging to purchase a home. Houston's population growth is projected to increase as the economy draws more young professionals.
Millennials, who comprise nearly one-fourth of Houston's population, are likely to keep the city's multifamily market active and increase demand for spaces.
Do your research, stay diligent, and happy investing.
Methodology
This report was written with property information from the MyEListing.com platform in corroboration with other freely available commercial real estate research data.
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